Just 8 pc of Spotify users pay

Spotify is earning 80 per cent of its revenue from only eight per cent of its
users, according to the music site’s latest figures.

4:10PM BST 22 Aug 2012

The popular Swedish music service has released its year-end financial report for 2011 and the figures reveal that the majority of its users do not make Spotify any money.

By the end of 2011, Spotify had 32.8 million registered users. However, only 2.6 million were paying subscribers to one its two paid for offers.

Consequently the remaining 30.2 million customers were using the free advertising-support service. This means that eight per cent of the user base brought in 83.5 per cent of Spotify’s total revenue. The majority of the rest came from advertising revenue.

It is no surprise that the ratio is this way around. However, the gap was not expected to be as large as it was thought that Spotify had managed to upsell more of its users into its monthly paid-for offering – especially since launching stateside last year.

Additionally, 'registered' users does not take into account how many are active.

A Spotify spokesman said: "Offering both a basic free and fully-featured paid-for service has been instrumental to what we've achieved so far, both in fighting piracy and convincing millions of people to pay for music. Over 15m people now actively use the service worldwide, with 4m of them now paying. That's a pretty phenomenal following for a music service still in its relative infancy. 2011 saw us continue our focus on bringing an unrivalled music experience to a global audience. We're building for the long-term."

The company has experienced 300 per cent growth year on year in its subscription revenue and also a 30 per cent rise in its advertising revenues.

In total Spotify made £148m in revenues during 2011.

It is also enjoying some success with a new revenue stream: paid-for downloadable content.